MAJOR PAPERS:

• The Financial Times reported that Bain Capital, The Blackstone Group LP (NYSE: BX) and General Electric Company's (NYSE: GE) NBC universal will acquire The Weather Channel properties from Landmark Communications for approximately $3.2B in a leveraged buy-out. The Weather Channel will be run separately.
• A top Goldman Sachs Group Inc (NYSE: GS) trader is defecting to GLG Partners Inc (NYSE: GLG), the UK's second-largest hedge fund. Goldman's Driss Ben-Brahim, a partner in the firm and the head of its emerging market trading business, will take over GLG's $1.2B emerging markets special situations fund, the Financial Times reported.

• Take-Two Interactive Software Inc (NASDAQ: TTWO), which makes video games, will probably sign video game creator Ken Levine to a new contract. The deal would bolster Take Two's argument that its value exceeds the $25.74 per share that Electronic Arts Inc (NASDAQ: ERTS) has offered as a takeover price for the company, The New York Post believes.

• Reuters reported that Deutsche Bank AG (NYSE: DB) is the only bidder remaining for Citigroup Incorporated's (NYSE: C) German retail operations. Sources said Commerzbank AG (OTC: CRZBY) dropped out of the running on Friday.

It appears that just after Electronic Arts Inc. (NASDAQ: ERTS) made a bid for Take-Two (NASDAQ: TTWO) that the board of the smaller company granted management an extraordinary pay package. A number of media are now "going negative" on that deal.

According to The New York Times, "Just days after Take Two Interactive, the troubled video game maker, received a buyout offer from a rival, Electronic Arts, the board of Take-Two approved a measure that significantly increased the compensation that management would receive in a merger or takeover, according to regulatory filings." The Wall Street Journal and MarketWatch have raised similar concerns.

Among other things the monthly management fees paid to ZelnickMedia, which employs the Take-Two CEO and Chairman, went from $208,333 a month up from $62,500. In the case of a takeover the management company would receive 780,000 shares.

Take-Two Interactive (NASDAQ: TTWO) is recently up $7.64 to $25.

Electronic Arts (NASDAQ: ERTS) made an offer of $26 a share for TTWO, a publisher of Grand Theft Auto videogames.

Cowen says: "Because of the potential accretion of the deal to ERTS, we believe there is a good chance that the deal could get done at a higher price than the current offer."

TTWO overall option implied volatility of 70 is near its 26-week average of 68 according to Track Data, suggesting non-directional price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

• The Chicago Board of Trade (NYSE: BOT) and Chicago Mercantile Exchange Holdings Inc (NYSE: CME) to hold a special shareholder meeting in Chicago about merging at 4pm.
• Take-Two Interactive Software (NASDAQ: TTWO) to hold a business update at 4:30pm.
• Alcoa Inc (NYSE: AA) to report Q2 earnings; conference call at 5pm.

• Electronic Entertainment Expo, or E3, to be held from July 10-July 13 in Santa Monica, California.
• The Home Depot Inc (NYSE: HD) to release a 2007 Sales Update at 9am.
• Sealy Corporation (NYSE: ZZ) to report Q2 earnings; conference call at 5pm.

When it was announced that the release of Take Two Interactive's (NASDAQ: TTWO) Manhunt 2 video game was being delayed due to outrage over its violent content, Wall Street shrugged, sending the shares up a little more than 1% on Friday in spite of a big drop for the broader market. As Kevin Shult wrote on BloggingStocks:

Take-Two could still appeal the rating of a more toned-down version that fits the "Mature" rating for players 17 and older. However, the AP's Matt Slagle reports that the decision to suspend distribution of Manhunt 2 could actually boost demand, according to industry analysts. Colin Sebastian, an analyst at Lazard Capital Markets, tells Slagle that he doesn't believe the game will hurt Take-Two's bottom line in the long term, and he considers the recent controversy over the game to be great exposure. "It's free publicity," Sebastian said. "Consumer backlash is a risk, but at the end of the day if it's rated 'M' the retailers will take it."

Take Two Interactive has a reputation for pushing the envelope in terms of what's acceptable in terms of video game content. It's Grand Theft Auto series has been hugely controversial, but that's also been a big part of the company's success.

While violence and smut might not be a cause for alarm for investors, here's what should be of concern: options backdating, accounting irregularities, and just general managerial incompetence and sleaze. Back in April, I wondered whether there was a connection between the company's corporate governance problems and its reputation for producing a morally bankrupt product: James Steyer, CEO and founder of the multimedia ratings group Common Sense Media, a non-profit that rates video games for violence and other objectionable content: "If you look at the content of what these guys have distributed, it's so offensive and inappropriate. It's not surprising to learn they had committed massive acts of fraud at the board and CEO level."

So while the latest fiasco surrounding Manhunt 2 has generated a lot of free publicity for the company, I would still stay away from the shares.

The SEC's informal investigation of Take-Two Interactive Software, Inc. (NASDAQ: TTWO) has gone formal. This comes after years of controversy surrounding the company including allegations of overstated earnings, options backdating, hidden porn in the company's Grand Theft Auto video game, and the current battle for control of the company. The formal investigation will, according to Herb Greenberg, give the SEC "carte blanche to subpoena anybody and everybody."

Interestingly, the stock didn't respond strongly to the news, perhaps a reflection of the changes in management that have occurred -- the market realizes there were massive governance problems, and expects the new management to clean things up. Still though, given the controversy and need for change, the shares don't look particularly cheap to me.

For more on my take on the situation at Take Two, read this piece from April 2.

A few years ago, my brother showed me the game Grand Theft Auto: Miami Vice, and I played it for a few hours. While I never really got into the whole game as far as pursuing goals and trying to actually do well, I enjoyed messing around and committing random acts of destruction. If you were to ask some investors, they might say this is how the management at Take Two Interactive Software (NASDAQ: TTWO), makers of the Grand Theft Auto Series, has run the company.

Enter angry investors: last week, a group of mutual funds, hedge funds, and other investors controlling 46% of the company said they would attempt to get rid of the board of directors and quite possibly the company's top management. On Monday, the company announced that it was postponing its annual meeting and would consider a sale of the company.

It's easy to understand why they would want a new board. The company has had just about every governance problem you could ever want: an options backdating scandal, a Hillary Clinton-led investigation into hidden sexual content in its games, a revolving door of executive changes, overstated revenue, etc.